Strongest Quarterly Results of the Year
Driven by Highest Transaction Volume of 2023
FOURTH QUARTER 2023 HIGHLIGHTS
- Total transaction volume of $9.3 billion, down 17% from
Q4’22
- Total revenues of $274.3 million, down 3% from Q4’22
- Net income of $31.6 million and diluted earnings per share of
$0.93, down 24% and 25%, respectively, from Q4’22
- Adjusted EBITDA1 of $87.6 million, down 5% from Q4’22
- Adjusted core EPS2 of $1.42, up 1% from Q4’22
- Servicing portfolio of $130.5 billion as of December 31, 2023,
up 6% from December 31, 2022
- Declared quarterly dividend of $0.65 per share for the first
quarter of 2024, up 3% from the fourth quarter of 2023
FULL YEAR 2023 HIGHLIGHTS
- Total transaction volume of $33.0 billion, down 48% from
2022
- Total revenues of $1.1 billion, down 16% from 2022
- Net income of $107.4 million and diluted earnings per share of
$3.18, both down 50% from 2022
- Adjusted EBITDA of $300.1 million, down 8% from 2022
- Adjusted core EPS of $4.68, down 16% from 2022
Walker & Dunlop, Inc. (NYSE: WD) (the “Company,” “Walker
& Dunlop,” or “W&D”) reported its strongest quarterly
results of 2023 in the fourth quarter. Total revenues were $274.3
million in the fourth quarter, a decrease of 3% year over year.
Fourth quarter total transaction volume was $9.3 billion, down 17%
year over year. Net income for the fourth quarter of 2023 was $31.6
million, or $0.93 per diluted share, down 24% and 25%,
respectively, year over year. Adjusted EBITDA was down only 5% over
the same period in 2022, reflecting the stability of revenues from
our servicing and asset management segment. The Company’s Board of
Directors declared a dividend of $0.65 per share for the first
quarter of 2024, the sixth consecutive year the dividend has
increased.
“We ended 2023 with solid fourth quarter financial results
thanks to $9.3 billion of sales and financing volume, combined with
our recurring revenues from servicing and asset management, which
drove our highest revenues and quarterly earnings of 2023,"
commented Walker & Dunlop Chairman and CEO Willy Walker. "In an
extremely challenging year -- when W&D's sales and financing
volumes were off by 48% -- it is a true testament to our business
model, active management, and talented team that we generated over
$300 million of adjusted EBITDA, only down 8% for the year."
“Walker & Dunlop's consistently conservative credit culture
and focus on the multifamily industry paid dividends in 2023 and
positions us well for any market rebound in 2024," continued
Walker. "But the commercial real estate market has plenty of
challenges ahead, and the severity of those challenges will depend
on the timing, pace, and degree of rate cuts. We are very bullish
about Walker & Dunlop's long-term outlook, and optimistic that
2024 will bring an uptick in financing and sales volumes throughout
the CRE ecosystem." Walker concluded, "W&D has the people,
brand and technology to continue gaining market share and
outperforming the competition."
CONSOLIDATED FOURTH QUARTER 2023 OPERATING
RESULTS
TRANSACTION VOLUMES
(dollars in thousands)
Q4 2023
Q4 2022
$ Variance
% Variance
Fannie Mae
$
1,692,405
$
994,590
$
697,815
70
%
Freddie Mac
1,308,263
2,305,826
(997,563
)
(43
)
Ginnie Mae - HUD
316,960
186,784
130,176
70
Brokered (3)
2,885,454
4,375,704
(1,490,250
)
(34
)
Principal Lending and Investing (4)
218,750
31,512
187,238
594
Debt financing volume
$
6,421,832
$
7,894,416
$
(1,472,584
)
(19
)%
Property sales volume
2,877,399
3,315,287
(437,888
)
(13
)
Total transaction volume
$
9,299,231
$
11,209,703
$
(1,910,472
)
(17
)%
Discussion of Results:
- Total debt financing volume decreased 19% due to the continued
challenging macroeconomic environment in the fourth quarter of
2023. The $9.3 billion in total transaction volume represents a 9%
sequential increase in transaction volume from the third quarter
and our highest quarterly volume of 2023.
- Fannie Mae transaction volume increased 70% in the fourth
quarter of 2023 and solidified our ranking as the #1 Fannie Mae
Lender in 2023 for the fifth consecutive year. We ended the year as
the #3 Freddie Mac Optigo Lender and the second largest combined
GSE lender in the country.
- The 70% increase in HUD debt financing volumes reflected our
strongest quarter of the year amidst high interest rates and
elongated processing times, which impacted our overall HUD pipeline
throughout the year.
- The decrease in brokered debt and property sales volume was
driven by higher interest rates, decreased liquidity supplied to
the commercial real estate sector, and dramatically lower
acquisition and capital markets activity as the commercial real
estate industry continues to adjust to this macroeconomic
environment.
MANAGED PORTFOLIO
(dollars in thousands, unless otherwise
noted)
Q4 2023
Q4 2022
$ Variance
% Variance
Fannie Mae
$
63,699,106
$
59,226,168
$
4,472,938
8
%
Freddie Mac
39,330,545
37,819,256
1,511,289
4
Ginnie Mae - HUD
10,460,884
9,868,453
592,431
6
Brokered
16,940,850
16,013,143
927,707
6
Principal Lending and Investing
40,139
206,835
(166,696
)
(81
)
Total Servicing Portfolio
$
130,471,524
$
123,133,855
$
7,337,669
6
%
Assets under management
17,321,452
16,748,449
573,003
3
Total Managed Portfolio
$
147,792,976
$
139,882,304
$
7,910,672
6
%
Custodial escrow account balance at period
end (in billions)
$
2.7
$
2.7
Weighted-average servicing fee rate (basis
points)
24.1
24.5
Weighted-average remaining servicing
portfolio term (years)
8.2
8.8
Discussion of Results:
- Our servicing portfolio continues to expand as a result of the
additional GSE debt financing volumes over the past 12 months,
partially offset by principal paydowns and loan payoffs.
- During the fourth quarter of 2023, we added $1.5 billion of net
loans to our servicing portfolio, and over the past 12 months, we
added $7.3 billion of net loans to our servicing portfolio, 82% of
which were Fannie Mae and Freddie Mac loans.
- $10.2 billion of Agency loans in our servicing portfolio are
scheduled to mature over the next two years. These loans, with a
low weighted-average servicing fee of 19 basis points, represent
only 9% of our total Agency loans in the portfolio.
- The mortgage servicing rights (“MSRs”) associated with our
servicing portfolio had a fair value of $1.4 billion as of both
December 31, 2023 and 2022.
- Assets under management as of December 31, 2023 consisted of
$15.1 billion of LIHTC, $1.4 billion of debt funds, and $0.9
billion of equity funds. The $0.6 billion increase is due to
increased syndication activity of tax credit funds and the closing
of Fund VII at Walker & Dunlop Investment Partners
(“WDIP”).
KEY PERFORMANCE METRICS
(dollars in thousands, except per share
amounts)
Q4 2023
Q4 2022
$ Variance
% Variance
Walker & Dunlop net income
$
31,599
$
41,492
$
(9,893
)
(24
)%
Adjusted EBITDA
87,582
92,625
(5,043
)
(5
)
Diluted EPS
$
0.93
$
1.24
$
(0.31
)
(25
)%
Adjusted core EPS
$
1.42
$
1.41
$
0.01
1
%
Operating margin
14
%
17
%
Return on equity
7
10
Key Expense Metrics (as a percentage of
total revenues):
Personnel expenses
46
%
49
%
Other operating expenses
13
9
Discussion of Results:
- The decrease in Walker & Dunlop net income was the result
of a 17% decrease in income from operations and an increase in our
effective tax rate due to a one-time benefit in 2022.
- The decrease in adjusted EBITDA was primarily the result of
lower investment management fees, from a decline in disposition
activity due to the challenging market, largely offset by increased
placement fees and other interest income and lower personnel
expenses.
- Operating margin decreased due to the decline in total
transaction volume that lowered income from operations. Our
transaction-related businesses are scaled to execute a
significantly larger volume of business, and lower commercial real
estate transaction activity continues to put downward pressure on
our operating margins.
- Return on equity declined primarily due to the 24% decrease in
net income combined with a 2% increase in stockholders’ equity over
the past year.
- Personnel expenses as a percentage of total revenues decreased
to 46%, driven by the impact of our workforce reduction that became
effective in May of 2023 and decreased variable compensation costs
for our production team.
- Other operating expenses as a percentage of total revenues
increased as a result of a $13.5 million benefit from contingent
consideration liability fair value adjustments and no goodwill
impairment in the fourth quarter of 2022. In the fourth quarter of
2023, there was goodwill impairment that substantially offset the
contingent consideration liability fair value adjustments.
KEY CREDIT METRICS
(dollars in thousands)
Q4 2023
Q4 2022
$ Variance
% Variance
At-risk servicing portfolio (5)
$
58,801,055
$
54,232,979
$
4,568,076
8
%
Maximum exposure to at-risk portfolio
(6)
11,949,041
10,993,596
955,445
9
Defaulted loans (7)
$
27,214
$
36,983
$
(9,769
)
(26
)%
Key credit metrics (as a percentage of
the at-risk portfolio):
Defaulted loans
0.05
%
0.07
%
Allowance for risk-sharing
0.05
0.08
Key credit metrics (as a percentage of
maximum exposure):
Allowance for risk-sharing
0.26
%
0.40
%
Discussion of Results:
- Our at-risk servicing portfolio, which is comprised of loans
subject to a defined risk-sharing formula, increased primarily due
to the level of Fannie Mae loans added to the portfolio during the
past 12 months. As of December 31, 2023, three at-risk loans were
in default with an aggregate UPB of $27.2 million compared to two
at-risk loans with an aggregate UPB of $37.0 million that were in
default as of December 31, 2022. The collateral-based reserve on
defaulted loans was $2.8 million and $4.4 million as of December
31, 2023 and December 31, 2022, respectively. The at-risk servicing
portfolio continues to exhibit strong credit quality, with very low
levels of delinquencies and strong operating performance of the
underlying properties in the portfolio.
- The on-balance sheet interim loan portfolio, which is comprised
of loans for which we have full risk of loss, was $40.1 million as
of December 31, 2023 compared to $206.8 million as of December 31,
2022. We did not have any defaulted loans in our interim loan
portfolio as of December 31, 2023, compared to one defaulted loan
of $14.7 million in our interim loan portfolio as of December 31,
2022. During 2023, we sold the defaulted asset. One of the two
remaining loans in the on-balance sheet interim loan portfolio is
current and performing as of December 31, 2023. The other loan,
with an unpaid principal balance of $14.2 million, matured in
December 2023, and the sponsor is in process of refinancing the
loan. We do not expect any loss from this loan. The interim loan
joint venture held $710.0 million of loans as of December 31, 2023
and $892.8 million of loans as of December 31, 2022. We share in a
small portion of the risk of loss, and, as of December 31, 2023,
all loans in the interim loan joint venture are current and
performing.
- We take credit risk exclusively on loans backed by multifamily
assets and have no credit exposure to losses in any other sector of
the commercial real estate lending market.
FOURTH QUARTER 2023 - FINANCIAL RESULTS BY
SEGMENT
Interest expense on corporate debt is determined at a
consolidated corporate level and allocated to each segment
proportionally based on each segment’s use of that corporate
debt.
Income tax expense is determined at a consolidated corporate
level and allocated to each segment proportionally based on each
segment’s income from operations, except for significant, one-time
tax activities, which are allocated entirely to the segment
impacted by the tax activity.
The following details explain the changes in these expense items
at a consolidated corporate level:
- Interest expense on corporate debt increased $6.5 million or
54% from the fourth quarter of 2022 to the fourth quarter of 2023
due to increases in (i) the interest rate as our corporate debt’s
floating rate is tied to short-term interest rates, (ii) the
outstanding principal balance of corporate debt.
- Income tax expense increased $0.8 million or 8% from the fourth
quarter of 2022 to the fourth quarter of 2023 primarily as a result
of a decrease in realizable excess tax benefits and a one-time tax
benefit during 2022 related to the GeoPhy acquisition, partially
offset by a 17% decrease in income from operations.
FINANCIAL RESULTS - CAPITAL
MARKETS
(dollars in thousands)
Q4 2023
Q4 2022
$ Variance
% Variance
Loan origination and debt brokerage fees,
net ("Origination fees")
$
64,946
$
72,119
$
(7,173
)
(10
)%
Fair value of expected net cash flows from
servicing, net ("MSR income")
34,471
31,790
2,681
8
Property sales broker fees
15,135
20,490
(5,355
)
(26
)
Net warehouse interest income (expense),
LHFS
(2,491
)
252
(2,743
)
(1,088
)
Other revenues
17,020
11,208
5,812
52
Total revenues
$
129,081
$
135,859
$
(6,778
)
(5
)%
Personnel
$
93,948
$
113,355
$
(19,407
)
(17
)%
Amortization and depreciation
1,138
893
245
27
Interest expense on corporate debt
4,909
3,159
1,750
55
Goodwill impairment
48,000
—
48,000
N/A
Fair value adjustments to contingent
consideration liabilities
(48,500
)
(18,000
)
(30,500
)
169
Other operating expenses
4,957
6,945
(1,988
)
(29
)
Total expenses
$
104,452
$
106,352
$
(1,900
)
(2
)%
Income from operations
$
24,629
$
29,507
$
(4,878
)
(17
)%
Income tax expense
6,362
(1,070
)
7,432
(695
)
Net income before noncontrolling
interests
$
18,267
$
30,577
$
(12,310
)
(40
)%
Less: net income (loss) from
noncontrolling interests
748
102
646
633
Walker & Dunlop net income
$
17,519
$
30,475
$
(12,956
)
(43
)%
Key revenue metrics (as a percentage of
debt financing volume):
Origination fee margin (8)
1.05
%
0.92
%
MSR margin (9)
0.56
0.40
Agency MSR margin (10)
1.04
0.91
Key performance metrics:
Operating margin
19
%
22
%
Adjusted EBITDA
$
(1,608
)
$
6,411
$
(8,019
)
(125
)%
Capital Markets - Discussion of
Quarterly Results:
The Capital Markets segment includes our Agency lending, debt
brokerage, property sales, appraisal and valuation services, and
housing market research businesses.
- The decrease in origination fees was primarily the result of a
decrease in our overall debt financing volume, partially offset by
an increase in the origination fee margin due to an increase in
Agency debt financing volume as a percentage of overall debt
financing volume from 44% in the fourth quarter of 2022 to 52% in
the fourth quarter of 2023.
- The increase in MSR income was attributable to the increase in
the Agency MSR margin shown above due to an increase in Fannie Mae
volume as a percentage of Agency debt financing volume, which
increased the estimated fair value of the future cash flows,
partially offset by a decrease in Agency debt financing
volume.
- The decrease in property sales broker fees was primarily driven
by the decrease in transaction activity and a decline in the
profitability of the sales.
- The decrease in net warehouse interest income was driven by an
inverted yield curve during the fourth quarter of 2023. Short-term
interest rates upon which we incur interest expense were higher
than the long-term mortgage rates upon which we earn interest
income.
- The increase in other revenues is primarily related to an
increase in investment banking revenues year over year.
- Personnel expense decreased primarily due to decreases in (i)
commissions expense as a result of the decline in origination fees
and property sales broker fees and (ii) salaries and bonuses due to
the workforce reduction in the second quarter of 2023.
- The goodwill impairment in the fourth quarter of 2023 was due
to market conditions leading to lower projected cash flows from the
GeoPhy acquisition, compared to no impairment in 2022.
- In the fourth quarter of 2023, the fair value adjustment to
contingent consideration liabilities resulted in a $48.5 million
benefit compared to an $18.0 million benefit in the fourth quarter
of 2022 due to a reduction in forecasted cash flows for the
contingent consideration liability related to our 2022 acquisition
of GeoPhy.
- The decrease in adjusted EBITDA was due to the decreases in
origination fees, property sales broker fees, and net warehouse
interest income (expense), partially offset by the increase in
other revenues, the decrease in personnel expenses and the decrease
in other operating expenses.
FINANCIAL RESULTS - SERVICING
& ASSET MANAGEMENT
(dollars in thousands)
Q4 2023
Q4 2022
$ Variance
% Variance
Origination fees
$
1,262
$
115
$
1,147
997
%
Servicing fees
79,887
77,275
2,612
3
Investment management fees
537
24,586
(24,049
)
(98
)
Net warehouse interest income, LHFI
414
1,504
(1,090
)
(72
)
Placement fees and other interest
income
40,738
24,844
15,894
64
Other revenues
16,829
18,336
(1,507
)
(8
)
Total revenues
$
139,667
$
146,660
$
(6,993
)
(5
)%
Personnel
$
20,738
$
16,759
$
3,979
24
%
Amortization and depreciation
53,043
55,014
(1,971
)
(4
)
Provision (benefit) for credit losses
636
1,142
(506
)
(44
)
Interest expense on corporate debt
11,104
8,233
2,871
35
Fair value adjustments to contingent
consideration liabilities
—
4,488
(4,488
)
(100
)
Other operating expenses
12,117
10,715
1,402
13
Total expenses
$
97,638
$
96,351
$
1,287
1
%
Income from operations
$
42,029
$
50,309
$
(8,280
)
(16
)%
Income tax expense
11,269
3,209
8,060
251
Net income before noncontrolling
interests
$
30,760
$
47,100
$
(16,340
)
(35
)%
Less: net income (loss) from
noncontrolling interests
(3,311
)
(3,959
)
648
(16
)
Walker & Dunlop net income
$
34,071
$
51,059
$
(16,988
)
(33
)%
Key performance metrics:
Operating margin
30
%
34
%
Adjusted EBITDA
$
110,543
$
114,541
$
(3,998
)
(3
)%
Servicing & Asset Management -
Discussion of Quarterly Results:
The Servicing & Asset Management segment includes loan
servicing, principal lending and investing, management of
third-party capital invested in tax credit equity funds focused on
the affordable housing sector and other commercial real estate, and
real estate-related investment banking and advisory services.
- The $7.3 billion net increase in the servicing portfolio over
the past 12 months was the principal driver of the growth in
servicing fees year over year, partially offset by a slight
decrease in the servicing portfolio’s weighted-average servicing
fee.
- Investment management fees decreased as a result of lower
dispositions revenue from our LIHTC funds. As tax credit
investments in our managed portfolio mature, they are sold or
recapitalized. The disruption in the acquisitions market and
tighter liquidity led to a slowdown in disposition activity year
over year.
- Placement fees and other interest income increased largely as a
result of higher placement fees from escrow deposits due to
substantially higher short-term interest rates.
- The increase in personnel expense was primarily the result of
increases in salaries and benefits and commission costs. The
aforementioned workforce reduction did not have a material impact
on this segment given the stability in earnings and operations.
Commission expense increased primarily due to an increase in
syndication fees from higher annual syndication volumes in 2023
compared to 2022.
- The change in fair value adjustments to contingent
consideration liabilities was primarily due to a contingent
consideration revaluation related to Alliant in the fourth quarter
of 2022 with no comparable activity in the fourth quarter of
2023.
- Other operating expenses increased primarily as a result of
elevated professional fees, due to increased syndication activity.
Much of the professional fees incurred from the syndication
activity are reimbursable from the LIHTC funds.
- Adjusted EBITDA decreased primarily due to the decrease in
investment management fees.
FINANCIAL RESULTS -
CORPORATE
(dollars in thousands)
Q4 2023
Q4 2022
$ Variance
% Variance
Other interest income
$
4,472
$
1,303
$
3,169
243
%
Other revenues
1,116
(972
)
2,088
(215
)
Total revenues
$
5,588
$
331
$
5,257
1,588
%
Personnel
$
11,179
$
7,644
$
3,535
46
%
Amortization and depreciation
1,834
2,023
(189
)
(9
)
Interest expense on corporate debt
2,585
718
1,867
260
Other operating expenses
17,281
22,588
(5,307
)
(23
)
Total expenses
$
32,879
$
32,973
$
(94
)
(0
)%
Income (loss) from operations
$
(27,291
)
$
(32,642
)
$
5,351
(16
)%
Income tax expense (benefit)
(7,300
)
7,400
(14,700
)
(199
)
Walker & Dunlop net income
(loss)
$
(19,991
)
$
(40,042
)
$
20,051
(50
)%
Key performance metric:
Adjusted EBITDA
$
(21,353
)
$
(28,327
)
$
6,974
(25
)%
Corporate - Discussion of Quarterly
Results:
The Corporate segment consists of corporate-level activities
including accounting, information technology, legal, human
resources, marketing, internal audit, and various other corporate
groups (“support functions”). The Company does not allocate costs
from these support functions to its other segments in presenting
segment operating results.
- The increase in total revenues was primarily driven by the
increase in interest income from our corporate cash balances due to
higher short-term interest rates, combined with an increase in
average balances held in interest earning accounts. Additionally,
other revenues, which primarily consist of gains and losses on
equity-method investments, shifted from a loss in the fourth
quarter of 2022 to a gain in the fourth quarter of 2023 due to
improved performance of several equity-method investments.
- The increase in personnel expense was related to an increase in
subjective bonuses, partially offset by small decreases in other
personnel expenses. Subjective bonuses were reduced for company
performance in the fourth quarter of 2022 by a greater amount than
the fourth quarter of 2023.
- The decrease in other operating expenses was the result of our
cost-reduction initiatives in 2023.
CONSOLIDATED FULL YEAR 2023 OPERATING
RESULTS
FULL YEAR OPERATING RESULTS
AND KEY PERFORMANCE METRICS
(dollars in thousands)
2023
2022
$ Variance
% Variance
Debt financing volume
$
24,202,859
$
43,605,984
$
(19,403,125
)
(44
)%
Property sales volume
8,784,537
19,732,654
(10,948,117
)
(55
)
Total transaction volume
$
32,987,396
$
63,338,638
$
(30,351,242
)
(48
)%
Total revenues
1,054,440
1,258,753
(204,313
)
(16
)
Total expenses
916,243
993,788
(77,545
)
(8
)
Walker & Dunlop net income
$
107,357
$
213,820
$
(106,463
)
(50
)%
Adjusted EBITDA
300,123
325,095
(24,972
)
(8
)
Diluted EPS
$
3.18
$
6.36
$
(3.18
)
(50
)%
Adjusted core EPS
$
4.68
$
5.60
$
(0.92
)
(16
)%
Operating margin
13
%
21
%
Return on equity
6
13
Discussion of Full Year
Results:
- The decrease in total transaction volume was driven by declines
in every type of execution, including a 29% decrease in Agency debt
financing volume and a 55% decrease in both brokered debt financing
volume and property sales volume.
- The decrease in Walker & Dunlop net income was primarily
driven by the decreased transaction volume.
- The 8% decrease in adjusted EBITDA was primarily the result of
(i) lower fee income from the decline in total transaction volumes,
(ii) decreases in investment management fees from lower LIHTC
dispositions, and (iii) a decrease net warehouse interest income
due to an inverted yield curve. These decreases were largely offset
by increased placement fees and other interest income and lower
personnel and other operating expenses resulting from our cost
reduction initiatives implemented throughout 2023.
- Operating margin decreased, primarily as a result of the
significant decline in our transaction activity, coupled with a
one-time acquisition related benefit from the GeoPhy transaction in
2022, and a net benefit from contingent consideration liability
revaluations with no comparable benefit in 2023.
- Adjusted core EPS was down only 16% despite the 48% decline in
transaction volumes, illustrating the strength of our core
operating results.
- Return on equity declined, largely as a result of the 50%
decrease in net income combined with a 2% increase in stockholders’
equity over the past year.
FULL YEAR 2023 – FINANCIAL RESULTS BY
SEGMENT
Interest expense on corporate debt is determined at a
consolidated corporate level and allocated to each segment
proportionally based on each segment’s use of that corporate
debt.
Income tax expense is determined at a consolidated corporate
level and allocated to each segment proportionally based on each
segment’s income from operations, except for significant, one-time
tax activities, which are allocated entirely to the segment
impacted by the tax activity.
The following details explain the changes in these expense items
at a consolidated corporate level:
- Interest expense on corporate debt increased $34.2 million, or
100%, from 2022 to 2023, due to increases in (i) the interest rate,
as our corporate debt’s floating rate is tied to short-term
interest rates and (ii) the outstanding principal balance of
corporate debt.
- Income tax expense decreased $21.0 million, or 37%, from 2022
to 2023, primarily as a result of a 48% decrease in income from
operations, partially offset by a decrease in realizable excess tax
benefits and a one-time tax benefit during 2022 resulting from the
GeoPhy acquisition, with no comparable activity in 2023.
FULL YEAR FINANCIAL RESULTS -
CAPITAL MARKETS
(dollars in thousands)
2023
2022
$ Variance
% Variance
Origination fees
$
232,625
$
345,779
$
(113,154
)
(33
)%
MSR income
141,917
191,760
(49,843
)
(26
)
Property sales broker fees
53,966
120,582
(66,616
)
(55
)
Net warehouse interest income (expense),
LHFS
(9,497
)
9,667
(19,164
)
(198
)
Other revenues
57,755
41,046
16,709
41
Total revenues
$
476,766
$
708,834
$
(232,068
)
(33
)%
Personnel
$
375,450
$
485,958
$
(110,508
)
(23
)%
Amortization and depreciation
4,550
3,084
1,466
48
Interest expense on corporate debt
18,779
8,647
10,132
117
Goodwill impairment
62,000
—
62,000
N/A
Fair value adjustments to contingent
consideration liabilities
(62,500
)
(18,000
)
(44,500
)
247
Other operating expenses
19,994
29,817
(9,823
)
(33
)
Total expenses
$
418,273
$
509,506
$
(91,233
)
(18
)%
Income from operations
$
58,493
$
199,328
$
(140,835
)
(71
)%
Income tax expense
14,824
42,153
(27,329
)
(65
)
Net income before noncontrolling
interests
$
43,669
$
157,175
$
(113,506
)
(72
)%
Less: net income (loss) from
noncontrolling interests
2,489
1,097
1,392
127
Walker & Dunlop net income
$
41,180
$
156,078
$
(114,898
)
(74
)%
Capital Markets - Discussion of Full
Year Results:
- The decrease in origination fees was primarily the result of a
decrease in our overall debt financing volume, partially offset by
an increase in the origination fee margin due to (i) an increase in
Agency debt financing volume as a percentage of overall debt
financing volume and (ii) increased profitability in our GSE debt
financing volume.
- The decrease in MSR income was primarily attributable to a 29%
decrease in Agency debt financing volume.
- The decrease in property sales broker fees was driven by a 55%
decrease in property sales volumes.
- The decrease in net warehouse interest income was primarily due
to an inverted yield curve during 2023. Short-term interest rates
upon which we incur interest expense were higher than the long-term
mortgage rates upon which we earn interest income.
- The increase in other revenues was primarily related to an
increase in investment banking revenues, as our investment banking
team closed several large transactions in 2023 after a relatively
quiet year for investment banking services in 2022.
- The decrease in personnel expense was primarily driven by a
decrease in commissions and other production incentive expenses
related to lower transaction volumes year over year. Additionally,
salaries and benefits costs and subjective bonus expense decreased
as average headcount decreased due to the workforce reduction
announced in April 2023.
- The decrease in other operating expenses was due to
cost-reduction initiatives across a variety of cost categories,
with the most prominent decreases in professional fees and travel
and entertainment costs.
FULL YEAR FINANCIAL RESULTS -
SERVICING & ASSET MANAGEMENT
(dollars in thousands)
2023
2022
$ Variance
% Variance
Origination fees
$
1,784
$
2,228
$
(444
)
(20
)%
Servicing fees
311,914
300,191
11,723
4
Investment management fees
45,381
71,931
(26,550
)
(37
)
Net warehouse interest income, LHFI
3,864
6,110
(2,246
)
(37
)
Placement fees and other interest
income
141,374
51,010
90,364
177
Other revenues
59,526
75,960
(16,434
)
(22
)
Total revenues
$
563,843
$
507,430
$
56,413
11
%
Personnel
$
74,407
$
69,970
$
4,437
6
%
Amortization and depreciation
214,978
225,515
(10,537
)
(5
)
Provision (benefit) for credit losses
(10,452
)
(11,978
)
1,526
(13
)
Interest expense on corporate debt
42,489
23,621
18,868
80
Fair value adjustments to contingent
consideration liabilities
—
4,488
(4,488
)
(100
)
Other operating expenses
28,582
26,250
2,332
9
Total expenses
$
350,004
$
337,866
$
12,138
4
%
Income from operations
$
213,839
$
169,564
$
44,275
26
%
Income tax expense
54,198
35,859
18,339
51
Net income before noncontrolling
interests
$
159,641
$
133,705
$
25,936
19
%
Less: net income (loss) from
noncontrolling interests
(6,675
)
(5,986
)
(689
)
12
Walker & Dunlop net income
$
166,316
$
139,691
$
26,625
19
%
Servicing & Asset Management -
Discussion of Full Year Results:
- The $7.3 billion net increase in the servicing portfolio over
the past 12 months was the principal driver of the growth in
servicing fees year over year, partially offset by a decline in the
servicing portfolio’s weighted-average servicing fee.
- Investment management fees decreased as a result of lower
dispositions revenue from our LIHTC funds. As tax credit
investments in our managed portfolio mature, they are sold or
recapitalized. The disruption in the acquisitions market and
tighter liquidity led to a slowdown in disposition activity year
over year.
- Placement fees and other interest income increased largely as a
result of higher placement fee revenue on escrow deposit accounts
and an increase in interest income from pledged securities due to
substantially higher short-term interest rates.
- Other revenues decreased primarily due to a significant
decrease in prepayment activity, partially offset by an increase in
syndication fees due to the higher volume of capital syndicated
into our LIHTC funds.
- The increase in personnel expense was primarily the result of
increases in salaries and benefits and commission costs. The
increase in salaries and benefits was due to annual salary
increases, as the aforementioned workforce reduction did not have a
material impact on this segment given the stability in earnings and
operations. Commission accruals increased primarily due to the
aforementioned increase in syndication fees.
- The decrease in amortization and depreciation was largely the
result of a reduction in write offs of MSRs due to early loan
prepayments in a higher interest rate environment, partially offset
by an increase in amortization expense for existing MSRs.
- Other operating expenses increased primarily as a result of
elevated professional fees, largely resulting from increased
syndication activity.
FULL YEAR FINANCIAL RESULTS -
CORPORATE
(dollars in thousands)
2023
2022
$ Variance
% Variance
Other interest income
$
13,146
$
1,820
$
11,326
622
%
Other revenues
685
40,669
(39,984
)
(98
)
Total revenues
$
13,831
$
42,489
$
(28,658
)
(67
)%
Personnel
$
64,433
$
51,438
$
12,995
25
%
Amortization and depreciation
7,224
6,432
792
12
Interest expense on corporate debt
7,208
1,965
5,243
267
Other operating expenses
69,101
86,581
(17,480
)
(20
)
Total expenses
$
147,966
$
146,416
$
1,550
1
%
Income (loss) from operations
$
(134,135
)
$
(103,927
)
$
(30,208
)
29
%
Income tax expense (benefit)
(33,996
)
(21,978
)
(12,018
)
55
Walker & Dunlop net income
(loss)
$
(100,139
)
$
(81,949
)
$
(18,190
)
22
%
Corporate - Discussion of Full Year
Results:
- The increase in other interest income was driven by interest
income from our corporate cash balances due to higher short-term
interest rates year over year combined with an increase in the
average balance held in interest earnings accounts.
- The decrease in other revenues was primarily driven by a $39.6
million gain from the revaluation of an equity-method investment in
connection with an acquisition, a unique transaction in 2022.
- The increase in personnel expense was primarily the result of
increases in (i) subjective bonuses which were reduced below target
payouts in both 2023 and 2022 due to Company performance, but to a
greater extent in 2022, and (ii) deferred compensation costs with
an equal and offsetting impact to revenues as the assets held in
the trust are marked-to-market periodically, partially offset by
(i) a decrease in stock compensation expense as we were accruing
performance-based stock compensation at a lower overall rate in
2023 than in 2022.
- The decrease in other operating expenses was largely the result
of our cost-reduction initiatives in 2023.
CAPITAL SOURCES AND USES
On February 14, 2024, the Company’s Board of Directors declared
a dividend of $0.65 per share for the first quarter of 2024, a 3%
increase from the fourth quarter of 2023. This is the sixth
consecutive annual increase in the Company’s dividend and
represents 160% growth in the dividend since it was initiated in
2018. The dividend will be paid on March 15, 2024 to all holders of
record of the Company’s restricted and unrestricted common stock as
of March 1, 2024.
On January 12, 2023, the Company entered into a lender joinder
agreement and amendment to our existing credit agreement that
provided for an incremental term loan with a principal amount of
$200 million. The incremental term loan bears interest at a rate
equal to adjusted Term SOFR plus 3.00% per annum and matures in
December 2028. Proceeds from the debt were used to repay $116
million of debt assumed in the Company’s acquisition of Alliant and
to strengthen the balance sheet for general corporate purposes.
On February 20, 2023, our Board of Directors authorized the
repurchase of up to $75.0 million of the Company’s outstanding
common stock over a 12-month period ending February 23, 2024 (“2023
Share Repurchase Program”). As of December 31, 2023, the Company
had $75.0 million of authorized share repurchase capacity remaining
under the 2023 Share Repurchase Program.
On February 14, 2024, our Board of Directors authorized the
repurchase of up to $75.0 million of the Company’s outstanding
common stock over a 12-month period ending February 23, 2025 (“2024
Share Repurchase Program”).
Any purchases made pursuant to the 2024 Share Repurchase Program
will be made in the open market or in privately negotiated
transactions from time to time as permitted by federal securities
laws and other legal requirements. The timing, manner, price and
amount of any repurchases will be determined by the Company in its
discretion and will be subject to economic and market conditions,
stock price, applicable legal requirements and other factors. The
repurchase program may be suspended or discontinued at any
time.
(1)
Adjusted EBITDA is a non-GAAP
financial measure the Company presents to help investors better
understand our operating performance. For a reconciliation of
adjusted EBITDA to net income, refer to the sections of this press
release below titled “Non-GAAP Financial Measures,” “Adjusted
Financial Measure Reconciliation to GAAP” and “Adjusted Financial
Measure Reconciliation to GAAP by Segment.”
(2)
Adjusted core EPS is a non-GAAP
financial measure the Company presents to help investors better
understand our operating performance. For a reconciliation of
Adjusted core EPS to Diluted EPS, refer to the sections of this
press release below titled “Non-GAAP Financial Measures” and
“Adjusted Core EPS Reconciliation.”
(3)
Brokered transactions for life
insurance companies, commercial banks, and other capital
sources.
(4)
Includes debt financing volumes
from our interim loan program, our interim loan joint venture, and
WDIP separate accounts.
(5)
At-risk servicing portfolio is
defined as the balance of Fannie Mae DUS loans subject to the
risk-sharing formula described below, as well as a small number of
Freddie Mac loans on which we share in the risk of loss. Use of the
at-risk portfolio provides for comparability of the full
risk-sharing and modified risk-sharing loans because the provision
and allowance for risk-sharing obligations are based on the at-risk
balances of the associated loans. Accordingly, we have presented
the key statistics as a percentage of the at-risk portfolio.
For example, a $15 million loan
with 50% risk-sharing has the same potential risk exposure as a
$7.5 million loan with full DUS risk sharing. Accordingly, if the
$15 million loan with 50% risk-sharing were to default, we would
view the overall loss as a percentage of the at-risk balance, or
$7.5 million, to ensure comparability between all risk-sharing
obligations. To date, substantially all of the risk-sharing
obligations that we have settled have been from full risk-sharing
loans.
(6)
Represents the maximum loss we
would incur under our risk-sharing obligations if all of the loans
we service, for which we retain some risk of loss, were to default
and all of the collateral underlying these loans was determined to
be without value at the time of settlement. The maximum exposure is
not representative of the actual loss we would incur.
(7)
Defaulted loans represent loans
in our Fannie Mae at-risk portfolio which are probable of
foreclosure or that have foreclosed and for which we have recorded
a collateral-based reserve (i.e. loans where we have assessed a
probable loss). Other loans that have defaulted but not foreclosed
or that are not probable of foreclosure are not included here.
Additionally, loans that have foreclosed or are probable of
foreclosure but are not expected to result in a loss to us are not
included here.
(8)
Origination fees as a percentage
of debt financing volume. Excludes the income and debt financing
volume from Principal Lending and Investing.
(9)
MSR income as a percentage of
debt financing volume. Excludes the income and debt financing
volume from Principal Lending and Investing.
(10)
MSR income as a percentage of
Agency debt financing volume.
CONFERENCE CALL INFORMATION
The Company will host a conference call to discuss its quarterly
results on Thursday, February 15, 2024 at 8:00 a.m. Eastern
time. Listeners can access the call via the dial-in number and
webcast link below. Presentation materials related to the
conference call will be posted to the Investor Relations section of
the Company’s website prior to the call. An audio replay will also
be available on the Investor Relations section of the Company’s
website, along with the presentation materials.
Phone: (888) 256-1007 from within the United States; (773)
305-6853 from outside the United States
Confirmation Code: 8217003
Webcast Link:
https://event.webcasts.com/starthere.jsp?ei=1653633&tp_key=8cfbb57f45
ABOUT WALKER & DUNLOP
Walker & Dunlop (NYSE: WD) is one of the largest commercial
real estate finance and advisory services firms in the United
States. Our ideas and capital create communities where people live,
work, shop, and play. The diversity of our people, breadth of our
brand and technological capabilities make us one of the most
insightful and client-focused firms in the commercial real estate
industry.
NON-GAAP FINANCIAL MEASURES
To supplement our financial statements presented in accordance
with United States generally accepted accounting principles
(“GAAP”), the Company uses adjusted EBITDA, adjusted core net
income, and adjusted core EPS, which are non-GAAP financial
measures. The presentation of these non-GAAP financial measures is
not intended to be considered in isolation or as a substitute for,
or superior to, the financial information prepared and presented in
accordance with GAAP. When analyzing our operating performance,
readers should use adjusted EBITDA, adjusted core net income, and
adjusted core EPS in addition to, and not as an alternative for,
net income and diluted EPS.
Adjusted core net income and adjusted core EPS represent net
income adjusted for amortization and depreciation, provision
(benefit) for credit losses, net write-offs, the fair value of
expected net cash flows from servicing, net, the income statement
impact from periodic revaluation and accretion associated with
contingent consideration liabilities related to acquired companies,
and other one-time adjustments, such as the gain associated with
the revaluation of our previously held equity-method investment in
connection with an acquisition, one-time benefit to tax expense
related to our corporate restructuring and repatriation of
intellectual property from an acquired subsidiary, and goodwill
impairment. Adjusted EBITDA represents net income before income
taxes, interest expense on our corporate debt, and amortization and
depreciation, adjusted for provision (benefit) for credit losses,
net write-offs, stock-based incentive compensation charges, the
fair value of expected net cash flows from servicing, net, the
write-off of the unamortized balance of premium associated with the
repayment of a portion of our corporate debt, the gain from
revaluation of a previously held equity-method investment, goodwill
impairment, and contingent consideration liability fair value
adjustments when the fair value adjustment is a triggering event
for a goodwill impairment assessment. Furthermore, adjusted EBITDA
is not intended to be a measure of free cash flow for our
management's discretionary use, as it does not reflect certain cash
requirements such as tax and debt service payments. The amounts
shown for adjusted EBITDA may also differ from the amounts
calculated under similarly titled definitions in our debt
instruments, which are further adjusted to reflect certain other
cash and non-cash charges that are used to determine compliance
with financial covenants. Because not all companies use identical
calculations, our presentation of adjusted EBITDA, adjusted core
net income and adjusted core EPS may not be comparable to similarly
titled measures of other companies.
We use adjusted EBITDA, adjusted core net income, and adjusted
core EPS to evaluate the operating performance of our business, for
comparison with forecasts and strategic plans and for benchmarking
performance externally against competitors. We believe that these
non-GAAP measures, when read in conjunction with the Company's GAAP
financial information, provide useful information to investors by
offering:
- the ability to make more meaningful period-to-period
comparisons of the Company's on-going operating results;
- the ability to better identify trends in the Company's
underlying business and perform related trend analyses; and
- a better understanding of how management plans and measures the
Company's underlying business.
We believe that these non-GAAP financial measures have
limitations in that they do not reflect all of the amounts
associated with the Company's results of operations as determined
in accordance with GAAP and that these non-GAAP financial measures
should only be used to evaluate the Company's results of operations
in conjunction with the Company’s GAAP financial information. For
more information on adjusted EBITDA, adjusted core net income, and
adjusted core EPS, refer to the section of this press release below
titled “Adjusted Financial Measure Reconciliation to GAAP” and
“Adjusted Financial Measure Reconciliation to GAAP By Segment.”
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this press release may
constitute forward-looking statements within the meaning of the
federal securities laws. Forward-looking statements relate to
expectations, projections, plans and strategies, anticipated events
or trends and similar expressions concerning matters that are not
historical facts. In some cases, you can identify forward-looking
statements by the use of forward-looking terminology such as “may,”
“will,” “should,” “expects,” “intends,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” or “potential” or the negative
of these words and phrases or similar words or phrases that are
predictions of or indicate future events or trends and which do not
relate solely to historical matters. You can also identify
forward-looking statements by discussions of strategy, plans, or
intentions.
The forward-looking statements contained in this press release
reflect our current views about future events and are subject to
numerous known and unknown risks, uncertainties, assumptions and
changes in circumstances that may cause actual results to differ
significantly from those expressed or contemplated in any
forward-looking statement.
While forward-looking statements reflect our good faith
projections, assumptions and expectations, they are not guarantees
of future results. Furthermore, we disclaim any obligation to
publicly update or revise any forward-looking statement to reflect
changes in underlying assumptions or factors, new information, data
or methods, future events or other changes, except as required by
applicable law. Factors that could cause our results to differ
materially include, but are not limited to: (1) general economic
conditions and multifamily and commercial real estate market
conditions, (2) changes in interest rates, (3) regulatory and/or
legislative changes to Freddie Mac, Fannie Mae or HUD, (4) our
ability to retain and attract loan originators and other
professionals, (5) success of our various investments funded with
corporate capital, and (6) changes in federal government fiscal and
monetary policies, including any constraints or cuts in federal
funds allocated to HUD for loan originations.
For a further discussion of these and other factors that could
cause future results to differ materially from those expressed or
contemplated in any forward-looking statements, see the section
titled “Risk Factors” in our most recent Annual Report on Form 10-K
and any updates or supplements in subsequent Quarterly Reports on
Form 10-Q and our other filings with the SEC. Such filings are
available publicly on our Investor Relations web page at
www.walkerdunlop.com.
Walker & Dunlop, Inc. and
Subsidiaries
Consolidated Balance Sheets
Unaudited
December 31,
September 30,
June 30,
March 31,
December 31,
2023
2023
2023
2023
2022
(in thousands)
Assets
Cash and cash equivalents
$
328,698
$
236,321
$
228,091
$
188,389
$
225,949
Restricted cash
21,422
17,768
21,769
20,504
17,676
Pledged securities, at fair value
184,081
177,509
170,666
165,081
157,282
Loans held for sale, at fair value
594,998
758,926
1,303,686
934,991
396,344
Mortgage servicing rights
907,415
921,746
932,131
946,406
975,226
Goodwill
901,710
949,710
963,710
959,712
959,712
Other intangible assets
181,975
185,927
189,919
194,208
198,643
Receivables, net
233,563
265,234
242,397
224,776
202,251
Committed investments in tax credit
equity
154,028
212,296
165,136
207,750
254,154
Other assets, net
541,103
552,414
589,919
651,235
658,122
Total assets
$
4,048,993
$
4,277,851
$
4,807,424
$
4,493,052
$
4,045,359
Liabilities
Warehouse notes payable
$
596,178
$
790,742
$
1,342,187
$
1,031,277
$
537,531
Notes payable
773,358
774,677
775,995
777,311
704,103
Allowance for risk-sharing obligations
31,601
30,957
32,410
33,087
44,057
Deferred tax liabilities, net
241,169
243,442
243,442
243,424
243,485
Commitments to fund investments in tax
credit equity
140,259
196,250
156,617
196,522
239,281
Other liabilities
520,299
510,792
532,276
496,335
560,073
Total liabilities
$
2,302,864
$
2,546,860
$
3,082,927
$
2,777,956
$
2,328,530
Stockholders' Equity
Common stock
$
329
$
328
$
327
$
327
$
323
Additional paid-in capital
425,488
420,062
412,182
405,303
412,636
Accumulated other comprehensive income
(loss)
(479
)
(1,864
)
(1,465
)
(1,621
)
(1,568
)
Retained earnings
1,298,412
1,287,653
1,287,334
1,281,119
1,278,035
Total stockholders’ equity
$
1,723,750
$
1,706,179
$
1,698,378
$
1,685,128
$
1,689,426
Noncontrolling interests
22,379
24,812
26,119
29,968
27,403
Total equity
$
1,746,129
$
1,730,991
$
1,724,497
$
1,715,096
$
1,716,829
Commitments and contingencies
—
—
—
—
—
Total liabilities and stockholders'
equity
$
4,048,993
$
4,277,851
$
4,807,424
$
4,493,052
$
4,045,359
Walker & Dunlop, Inc. and
Subsidiaries
Consolidated Statements of Income
and Comprehensive Income
Unaudited
Quarterly Trends
Years ended
December 31,
(in thousands, except per share
amounts)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
2023
2022
Revenues
Origination fees
$
66,208
$
56,149
$
64,968
$
47,084
$
72,234
$
234,409
$
348,007
MSR income
34,471
35,375
42,058
30,013
31,790
141,917
191,760
Servicing fees
79,887
79,200
77,061
75,766
77,275
311,914
300,191
Property sales broker fees
15,135
16,862
10,345
11,624
20,490
53,966
120,582
Investment management fees
537
13,362
16,309
15,173
24,586
45,381
71,931
Net warehouse interest income
(expense)
(2,077
)
(2,031
)
(1,526
)
1
1,756
(5,633
)
15,777
Placement fees and other interest
income
45,210
43,000
35,386
30,924
26,147
154,520
52,830
Other revenues
34,965
26,826
28,014
28,161
28,572
117,966
157,675
Total revenues
$
274,336
$
268,743
$
272,615
$
238,746
$
282,850
$
1,054,440
$
1,258,753
Expenses
Personnel
$
125,865
$
136,507
$
133,305
$
118,613
$
137,758
$
514,290
$
607,366
Amortization and depreciation
56,015
57,479
56,292
56,966
57,930
226,752
235,031
Provision (benefit) for credit losses
636
421
(734
)
(10,775
)
1,142
(10,452
)
(11,978
)
Interest expense on corporate debt
18,598
17,594
17,010
15,274
12,110
68,476
34,233
Goodwill impairment
48,000
14,000
—
—
—
62,000
—
Fair value adjustments to contingent
consideration liabilities
(48,500
)
(14,000
)
—
—
(13,512
)
(62,500
)
(13,512
)
Other operating expenses
34,355
28,529
30,730
24,063
40,248
117,677
142,648
Total expenses
$
234,969
$
240,530
$
236,603
$
204,141
$
235,676
$
916,243
$
993,788
Income from operations
$
39,367
$
28,213
$
36,012
$
34,605
$
47,174
$
138,197
$
264,965
Income tax expense
10,331
7,069
10,491
7,135
9,539
35,026
56,034
Net income before noncontrolling
interests
$
29,036
$
21,144
$
25,521
$
27,470
$
37,635
$
103,171
$
208,931
Less: net income (loss) from
noncontrolling interests
(2,563
)
(314
)
(2,114
)
805
(3,857
)
(4,186
)
(4,889
)
Walker & Dunlop net income
$
31,599
$
21,458
$
27,635
$
26,665
$
41,492
$
107,357
$
213,820
Net change in unrealized gains (losses) on
pledged available-for-sale securities, net of taxes
1,385
(399
)
156
(53
)
(108
)
1,089
(4,126
)
Walker & Dunlop comprehensive
income
$
32,984
$
21,059
$
27,791
$
26,612
$
41,384
$
108,446
$
209,694
Effective Tax Rate
26
%
25
%
29
%
21
%
20
%
25
%
21
%
Basic earnings per share
$
0.94
$
0.64
$
0.82
$
0.80
$
1.25
$
3.20
$
6.43
Diluted earnings per share
0.93
0.64
0.82
0.79
1.24
3.18
6.36
Cash dividends paid per common share
0.63
0.63
0.63
0.63
0.60
2.52
2.40
Basic weighted-average shares
outstanding
32,825
32,737
32,695
32,529
32,361
32,697
32,326
Diluted weighted-average shares
outstanding
32,941
32,895
32,851
32,816
32,675
32,875
32,687
SUPPLEMENTAL OPERATING
DATA
Unaudited
Quarterly Trends
Years ended
December 31,
(in thousands, except per share data and
unless otherwise noted)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
2023
2022
Transaction Volume:
Components of Debt Financing
Volume
Fannie Mae
$
1,692,405
$
1,739,332
$
2,230,952
$
1,358,708
$
994,590
$
7,021,397
$
9,950,152
Freddie Mac
1,308,263
1,072,048
1,212,887
975,737
2,305,826
4,568,935
6,320,201
Ginnie Mae - HUD
316,960
86,557
147,773
127,599
186,784
678,889
1,118,014
Brokered (1)
2,885,454
3,149,457
3,316,223
2,363,754
4,375,704
11,714,888
25,878,519
Principal Lending and Investing (2)
218,750
—
—
—
31,512
218,750
339,098
Total Debt Financing Volume
$
6,421,832
$
6,047,394
$
6,907,835
$
4,825,798
$
7,894,416
$
24,202,859
$
43,605,984
Property Sales Volume
2,877,399
2,508,073
1,504,383
1,894,682
3,315,287
8,784,537
19,732,654
Total Transaction Volume
$
9,299,231
$
8,555,467
$
8,412,218
$
6,720,480
$
11,209,703
$
32,987,396
$
63,338,638
Key Performance Metrics:
Operating margin
14
%
10
%
13
%
14
%
17
%
13
%
21
%
Return on equity
7
5
7
6
10
6
13
Walker & Dunlop net income
$
31,599
$
21,458
$
27,635
$
26,665
$
41,492
$
107,357
$
213,820
Adjusted EBITDA (3)
87,582
74,065
70,501
67,975
92,625
300,123
325,095
Diluted EPS
0.93
0.64
0.82
0.79
1.24
3.18
6.36
Adjusted core EPS (4)
1.42
1.11
0.98
1.17
1.41
4.68
5.60
Key Expense Metrics (as a percentage of
total revenues):
Personnel expenses
46
%
51
%
49
%
50
%
49
%
49
%
48
%
Other operating expenses
13
11
11
10
9
11
10
Key Revenue Metrics (as a percentage of
debt financing volume):
Origination fee margin (5)
1.05
%
0.93
%
0.93
%
0.97
%
0.92
%
0.97
%
0.80
%
MSR margin (6)
0.56
0.58
0.61
0.62
0.40
0.59
0.44
Agency MSR margin (7)
1.04
1.22
1.17
1.22
0.91
1.16
1.10
Other Data:
Market capitalization at period end
$
3,719,589
$
2,433,494
$
2,586,519
$
2,489,200
$
2,542,476
Closing share price at period end
$
111.01
$
74.24
$
79.09
$
76.17
$
78.48
Average headcount
1,341
1,344
1,385
1,440
1,464
Components of Servicing Portfolio (end
of period):
Fannie Mae
$
63,699,106
$
62,850,853
$
61,356,554
$
59,890,444
$
59,226,168
Freddie Mac
39,330,545
38,656,136
38,287,200
38,184,798
37,819,256
Ginnie Mae - HUD
10,460,884
10,320,520
10,246,632
10,027,781
9,868,453
Brokered (8)
16,940,850
17,091,925
16,684,115
16,285,391
16,013,143
Principal Lending and Investing (9)
40,139
40,000
71,680
187,505
206,835
Total Servicing Portfolio
$
130,471,524
$
128,959,434
$
126,646,181
$
124,575,919
$
123,133,855
Assets under management (10)
17,321,452
17,334,877
16,903,055
16,654,566
16,748,449
Total Managed Portfolio
$
147,792,976
$
146,294,311
$
143,549,236
$
141,230,485
$
139,882,304
Key Servicing Portfolio Metrics (end of
period):
Custodial escrow deposit balance (in
billions)
$
2.7
$
2.8
$
2.8
$
2.2
$
2.7
Weighted-average servicing fee rate (basis
points)
24.1
24.2
24.3
24.3
24.5
Weighted-average remaining servicing
portfolio term (years)
8.2
8.4
8.6
8.7
8.8
(1)
Brokered transactions for life
insurance companies, commercial banks, and other capital
sources.
(2)
Includes debt financing volumes
from our interim lending platform, our interim lending joint
venture, and WDIP separate accounts.
(3)
This is a non-GAAP financial
measure. For more information on adjusted EBITDA, refer to the
section above titled “Non-GAAP Financial Measures.”
(4)
This is a non-GAAP financial
measure. For more information on adjusted core EPS, refer to the
section above titled “Non-GAAP Financial Measures.”
(5)
Origination fees as a percentage
of debt financing volume. Excludes the income and debt financing
volume from Principal Lending and Investing.
(6)
MSR income as a percentage of
debt financing volume. Excludes the income and debt financing
volume from Principal Lending and Investing.
(7)
MSR income as a percentage of
Agency debt financing volume.
(8)
Brokered loans serviced primarily
for life insurance companies.
(9)
Consists of interim loans not
managed for our interim loan joint venture.
(10)
Walker & Dunlop Affordable
Equity, formerly known as “Alliant” assets under management,
commercial real estate loans and funds managed by WDIP, and interim
loans serviced for our interim loan joint venture.
KEY CREDIT METRICS
Unaudited
December 31,
September 30,
June 30,
March 31,
December 31,
(dollars in thousands)
2023
2023
2023
2023
2022
Risk-sharing servicing
portfolio:
Fannie Mae Full Risk
$
54,583,555
$
53,549,966
$
52,383,701
$
50,713,349
$
50,046,219
Fannie Mae Modified Risk
9,115,551
9,295,368
8,947,292
9,170,127
9,172,626
Freddie Mac Modified Risk
23,415
23,415
23,515
23,515
23,615
Total risk-sharing servicing
portfolio
$
63,722,521
$
62,868,749
$
61,354,508
$
59,906,991
$
59,242,460
Non-risk-sharing servicing
portfolio:
Fannie Mae No Risk
$
—
$
5,519
$
25,561
$
6,968
$
7,323
Freddie Mac No Risk
39,307,130
38,632,721
38,263,685
38,161,283
37,795,641
GNMA - HUD No Risk
10,460,884
10,320,520
10,246,632
10,027,781
9,868,453
Brokered
16,940,850
17,091,925
16,684,115
16,285,391
16,013,143
Total non-risk-sharing servicing
portfolio
$
66,708,864
$
66,050,685
$
65,219,993
$
64,481,423
$
63,684,560
Total loans serviced for others
$
130,431,385
$
128,919,434
$
126,574,501
$
124,388,414
$
122,927,020
Interim loans (full risk) servicing
portfolio
40,139
40,000
71,680
187,505
206,835
Total servicing portfolio unpaid
principal balance
$
130,471,524
$
128,959,434
$
126,646,181
$
124,575,919
$
123,133,855
Interim Loan Joint Venture Managed Loans
(1)
$
710,041
$
736,320
$
895,491
$
894,829
$
892,808
At-risk servicing portfolio (2)
$
58,801,055
$
57,857,659
$
56,430,098
$
54,898,461
$
54,232,979
Maximum exposure to at-risk portfolio
(3)
11,949,041
11,750,068
11,346,580
11,132,473
10,993,596
Defaulted loans(4)
27,214
—
36,983
36,983
36,983
Defaulted loans as a percentage of the
at-risk portfolio
0.05
%
0.00
%
0.07
%
0.07
%
0.07
%
Allowance for risk-sharing as a percentage
of the at-risk portfolio
0.05
0.05
0.06
0.06
0.08
Allowance for risk-sharing as a percentage
of maximum exposure
0.26
0.26
0.29
0.30
0.40
(1)
This balance consists entirely of
interim loan joint venture managed loans. We indirectly share in a
portion of the risk of loss associated with interim loan joint
venture managed loans through our 15% equity ownership in the joint
venture. We had no exposure to risk of loss for the loans serviced
directly for our interim loan joint venture partner. The balance of
this line is included as a component of assets under management in
the Supplemental Operating Data table.
(2)
At-risk servicing portfolio is
defined as the balance of Fannie Mae DUS loans subject to the
risk-sharing formula described below, as well as a small number of
Freddie Mac loans on which we share in the risk of loss. Use of the
at-risk portfolio provides for comparability of the full
risk-sharing and modified risk-sharing loans because the provision
and allowance for risk-sharing obligations are based on the at-risk
balances of the associated loans. Accordingly, we have presented
the key statistics as a percentage of the at-risk portfolio. For
example, a $15 million loan with 50% risk-sharing has the same
potential risk exposure as a $7.5 million loan with full DUS risk
sharing. Accordingly, if the $15 million loan with 50% risk-sharing
were to default, we would view the overall loss as a percentage of
the at-risk balance, or $7.5 million, to ensure comparability
between all risk-sharing obligations. To date, substantially all of
the risk-sharing obligations that we have settled have been from
full risk-sharing loans.
(3)
Represents the maximum loss we
would incur under our risk-sharing obligations if all of the loans
we service, for which we retain some risk of loss, were to default
and all of the collateral underlying these loans was determined to
be without value at the time of settlement. The maximum exposure is
not representative of the actual loss we would incur.
(4)
Defaulted loans represent loans
in our Fannie Mae at-risk portfolio which are probable of
foreclosure or that have foreclosed and for which we have recorded
a collateral-based reserve (i.e. loans where we have assessed a
probable loss). Other loans that have defaulted but not foreclosed
or that are not probable of foreclosure are not included here.
Additionally, loans that have foreclosed or are probable of
foreclosure but are not expected to result in a loss to us are not
included here.
ADJUSTED FINANCIAL MEASURE
RECONCILIATION TO GAAP
Unaudited
Quarterly Trends
Years ended
December 31,
(in thousands)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
2023
2022
Reconciliation of Walker & Dunlop Net
Income to Adjusted EBITDA
Walker & Dunlop Net Income
$
31,599
$
21,458
$
27,635
$
26,665
$
41,492
$
107,357
$
213,820
Income tax expense
10,331
7,069
10,491
7,135
9,539
35,026
56,034
Interest expense on corporate debt
18,598
17,594
17,010
15,274
12,110
68,476
34,233
Amortization and depreciation
56,015
57,479
56,292
56,966
57,930
226,752
235,031
Provision (benefit) for credit losses
636
421
(734
)
(10,775
)
1,142
(10,452
)
(11,978
)
Net write-offs (1)
—
(2,008
)
(6,033
)
—
(4,631
)
(8,041
)
(4,631
)
Stock-based compensation expense
5,374
7,427
7,898
7,143
6,833
27,842
33,987
MSR income
(34,471
)
(35,375
)
(42,058
)
(30,013
)
(31,790
)
(141,917
)
(191,760
)
Gain from revaluation of previously held
equity-method investment
—
—
—
—
—
—
(39,641
)
Write-off of unamortized premium from
corporate debt repayment
—
—
—
(4,420
)
—
(4,420
)
—
Goodwill impairment, net of contingent
consideration liability fair value adjustments
(500
)
—
—
—
—
(500
)
—
Adjusted EBITDA
$
87,582
$
74,065
$
70,501
$
67,975
$
92,625
$
300,123
$
325,095
(1)
The net write-off in Q2 2023 was
related to the write off of the collateral-based reserves related
to a loan held for investment.
ADJUSTED FINANCIAL MEASURE
RECONCILIATION TO GAAP BY SEGMENT
Unaudited
Capital Markets
Three months ended December
31,
(in thousands)
2023
2022
Reconciliation of Walker & Dunlop Net
Income to Adjusted EBITDA
Walker & Dunlop Net Income
$
17,519
$
30,475
Income tax expense
6,362
(1,070
)
Interest expense on corporate debt
4,909
3,159
Amortization and depreciation
1,138
893
Stock-based compensation expense
3,435
4,744
MSR income
(34,471
)
(31,790
)
Goodwill impairment, net of contingent
consideration liability fair value adjustments(1)
(500
)
—
Adjusted EBITDA
$
(1,608
)
$
6,411
Servicing & Asset
Management
Three months ended December
31,
(in thousands)
2023
2022
Reconciliation of Walker & Dunlop Net
Income to Adjusted EBITDA
Walker & Dunlop Net Income
$
34,071
$
51,059
Income tax expense
11,269
3,209
Interest expense on corporate debt
11,104
8,233
Amortization and depreciation
53,043
55,014
Provision (benefit) for credit losses
636
1,142
Net write-offs
—
(4,631
)
Stock-based compensation expense
420
515
Adjusted EBITDA
$
110,543
$
114,541
Corporate
Three months ended December
31,
(in thousands)
2023
2022
Reconciliation of Walker & Dunlop Net
Income to Adjusted EBITDA
Walker & Dunlop Net Income
(Loss)
$
(19,991
)
$
(40,042
)
Income tax expense (benefit)
(7,300
)
7,400
Interest expense on corporate debt
2,585
718
Amortization and depreciation
1,834
2,023
Stock-based compensation expense
1,519
1,574
Adjusted EBITDA
$
(21,353
)
$
(28,327
)
(1)
For the three months ended
December 31, 2023, includes goodwill impairment of $48.0 million
and contingent consideration liability fair value adjustments of
$48.5 million. For the three months ended ended December 31, 2022,
there was no goodwill impairment.
ADJUSTED CORE EPS
RECONCILIATION
Unaudited
Quarterly Trends
Years ended
December 31,
(in thousands)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
2023
2022
Reconciliation of Walker & Dunlop Net
Income to Adjusted Core Net Income
Walker & Dunlop Net Income
$
31,599
$
21,458
$
27,635
$
26,665
$
41,492
$
107,357
$
213,820
Provision (benefit) for credit losses
636
421
(734
)
(10,775
)
1,142
(10,452
)
(11,978
)
Net write-offs(1)
—
(2,008
)
(6,033
)
—
(4,631
)
(8,041
)
(4,631
)
Amortization and depreciation
56,015
57,479
56,292
56,966
57,930
226,752
235,031
MSR income
(34,471
)
(35,375
)
(42,058
)
(30,013
)
(31,790
)
(141,917
)
(191,760
)
Goodwill impairment
48,000
14,000
—
—
—
62,000
—
Contingent consideration accretion and
fair value adjustments
(47,637
)
(13,426
)
176
177
(12,637
)
(60,710
)
(8,870
)
Gain from revaluation of previously held
equity-method investment
—
—
—
—
—
—
(39,641
)
Income tax expense adjustment(2)(3)
(5,916
)
(5,285
)
(2,227
)
(3,372
)
(4,279
)
(17,141
)
(3,763
)
Adjusted Core Net Income
$
48,226
$
37,264
$
33,051
$
39,648
$
47,227
$
157,848
$
188,208
Reconciliation of Diluted EPS to Adjusted
core EPS
Walker & Dunlop Net Income
$
31,599
$
21,458
$
27,635
$
26,665
$
41,492
$
107,357
$
213,820
Diluted weighted-average shares
outstanding
32,941
32,895
32,851
32,816
32,675
32,875
32,687
Diluted EPS
$
0.93
$
0.64
$
0.82
$
0.79
$
1.24
$
3.18
$
6.36
Adjusted Core Net Income
$
48,226
$
37,264
$
33,051
$
39,648
$
47,227
$
157,848
$
188,208
Diluted weighted-average shares
outstanding
32,941
32,895
32,851
32,816
32,675
32,875
32,687
Adjusted Core EPS
$
1.42
$
1.11
$
0.98
$
1.17
$
1.41
$
4.68
$
5.60
(1)
The net write-off in Q2 2023 was
related to the write off of the collateral-based reserves related
to a loan held for investment.
(2)
Income tax impact of the above
adjustments to adjusted core net income. Uses quarterly or annual
effective tax rate as disclosed in the Consolidated Statements of
Income and Comprehensive Income in this “press release.”
(3)
Income tax expense adjustment for
Q3 2022 included an adjustment for a one-time tax benefit of $6.3
million related to the corporate restructuring and repatriation of
intellectual property acquired from an acquired subsidiary.
Category: Earnings
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240215066607/en/
Investors: Kelsey Duffey
Senior Vice President, Investor Relations Phone 301.202.3207
investorrelations@walkeranddunlop.com
Media: Carol McNerney Chief
Marketing Officer Phone 301.215.5515 info@walkeranddunlop.com
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